PARIS — Luxury players are better prepared than in the past to weather the current economic downturn — and are at the ready with an arsenal of cost-cutting measures, including scaling back store expansion, reducing boutique staffing and trimming spending on communication, including advertising.

That’s the conclusion of a new report by HSBC analysts Antoine Belge and Erwan Rambourg, who argue that contingency plans would cushion any hard landing.

“For most companies, the slowdown has been limited so far and the outlook provided by management remains positive, but this does not mean that they are complacent,” the report said. “There is low visibility in the magnitude of the current downturn, but we are certain this one will not take luxury companies by surprise.”

The analysts surveyed managers and said European luxury firms are better equipped to monitor any sales slowdowns and adjust resources accordingly than during the past three downturns: the SARS epidemic in 2003, the terrorist attacks in America in 2001 and the Asian financial crisis in 1998.

Firms are likely to ax consultants and market research first in the case of a steeper slowdown. Another example of a “can do without” cost: PPR plans to build a new headquarters this year for fast-growing Bottega Veneta but could postpone the project if necessary, the report said.

According to HSBC’s survey, most companies would cut advertising, promotion and public relations budgets, and also postpone store openings in countries where demand would be slowing significantly.

“In the U.S., most companies share our long-term thematic view that the country is still almost an emerging market when it comes to luxury goods and have therefore planned continued expansion there,” the report said. “Nevertheless, our survey shows that companies are pragmatic and ready to postpone openings should luxury goods demand in the U.S. collapse.”

HSBC has cut earnings estimates for European companies by 5 percent for 2008 and 2009, largely blaming a weakening dollar versus the euro. Its forecasts for organic sales growth remain unchanged at 9 percent on average for the sector, with 6 percentage points coming from fast-growing markets like Asia, excluding Japan, Eastern Europe and the Middle East.

This story first appeared in the April 1, 2008 issue of WWD. Subscribe Today.

“[Current] stock valuations assume a gloomy scenario — most regions slowing significantly at the same time — which we believe is unlikely,” the report said.

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